Kernel Wealth has named Xero co-founder, Alistair Grigg, as director as the loss-making manager targets break-even point this financial year.
Dean Anderson, Kernel founder, said Grigg, who replaces Paul Hocking on the board, would bring “tech leadership to support our wider team in our next phase of growth, particularly as we leverage more of the platform we have built to deliver a range of financial outcomes for Kiwis and advisers”.
The digital-only index fund manager cracked through $1 billion under management this year but turned in a loss of almost $6 million for the 12 months to March 31, burning through $1 million more than the $4.9 million deficit recorded in the 2022/23 accounts.
Kernel also took “the opportunity to raise additional funds from shareholders”, the report says, with the accounts showing a capital injection of $1.3 million in equity plus $1.7 million from convertible notes during the financial year.
As at the end of March, the group has notched up accumulated losses of almost $16 million.
However, Anderson said Kernel is on-track to break-even point this year amid strong flows that have seen its funds under management increase about 64 per cent year-on-year.
The firm’s deep-pocketed investors also remain supportive of the manager’s tech-led strategy.
“We’re intentionally invested in our technology and platform to build long-term scalability, which delivers better margins over time; which our board and shareholders take a long-term view on,” he said.
“Last year started a significant transition for Kernel as a business to move towards being a platform offering not only investments, but also tools and technology for Kiwis to grow their wealth.”
Among other new components added over the last 12 months, the business has raised about $30 million for its cash product while also signing on a dozen or so financial advisory firms to the Kernel KiwiSaver.
In addition to tech and financial expertise, Grigg, who previously served as Xero chief operating officer and Air NZ chief information officer, has experience in “scaling a global business” that Anderson said would prove invaluable as Kernel ratcheted up its growth plans.
But Kernel isn’t the only millennial-founded NZ investment manager tapping extra capital to grow and cover losses.
Founded in 2019 (a few months after Kernel), KiwiSaver provider, Kōura Wealth, reported a net loss of $1.7 million for the 12 months to the end of March with cash flow projections indicating the company would “require additional financial support to continue as a going concern”, according to the auditor’s (Grant Thornton) note.
“The Company has received a letter of support from its parent company advising that it will continue to provide financial support as required, however Directors note that the provision of this support is dependent on the Parent company raising additional funding, which it has an established pattern of doing so,” the auditor report says.
As reported last week, Kōura and Kernel have seen decent growth in KiwiSaver funds under management over the last financial year – both breaching $200 million recently – but the path to scale is an expensive one.
Kōura shareholders tipped in $1.2 million last financial year. Select Investment Services – a consortium of NZ Financial Services Group and Crest Holdings – owns about half of Kōura with founder, Rupert Carlyon, and ex Hobson Wealth chief, Warren Couillault, also substantial shareholders.